Q. My wife and I have had a Self-Managed Superannuation fund (SMSF) since 2002.  With the changes announced in the Budget with the lifetime Cap of $500,000 on after tax contributions to Superannuation (Non-Concessional Contributions), how am I meant to check how much of the cap I have available?  By law I have only been obliged to keep my SMSF tax records for 5 years and I have no way of verifying what I have contributed as after tax contributions prior to 2010?

A. On Budget night the Government proposed to replace the Superannuation Non-Concessional Contribution Cap (currently $180,000 a year or $540,000 every 3 years) with a lifetime cap of $500,000.  Contributions received in excess of $500,000 will need to be removed from the fund or be subject to penalty tax. If legislation is passed, the proposed change is effective from Budget night (3 May 2016) and captures all Non-Concessional contributions made into Superannuation since 1 July 2007.  Contributions received from 1 July 2007 and made before 3 May 2016 will not result in an excess to the cap.

The challenge for Trustees of SMSF is that they are only obliged to retain Superannuation fund records for 5 years.  Whilst we would anticipate that most trustees should have a record of the tax free components of their member balances, without the data on when the Non-Concessional contributions were made, verifying the tax free component  of the fund may be problematic.

We have been advised by the ATO that they are confident that their records are reliable back to 1 July 2007.  However there is often a lag between when contributions are made and when the ATO receives the data.  The ATO has advised that data in relation to Non-Concessional contributions can be requested via your Accountants Tax Agent Portal but the record only go back to 1 July 2007.

In the event of a dispute over a member’s contribution history, challenging the ATO’s records could be problematic. Remember the Trustee is obligated to provide the proof not the ATO.

The ATO calculates the tax free amounts manually, based on information provided by Superannuation funds, Income Tax returns and excess Concessional Contribution amounts released from funds. Note that Concessional contributions (Employer and deductible personal contributions) received to a fund above the applicable cap are counted as Non-Concessional Contributions. As do Government Superannuation Co-Contribution payments.

For all Trustees, the simplest way to verify your contribution history would be to check your annual tax returns for the fund. My strong recommendation to you would be to retain all SMSF records beyond the minimum 5 year period as you may be called upon to verify your relevant tax components beyond the 5 years.  Check with your Accountant to see if they have records beyond the 5 year period.  I suspect they don’t and this is why the ATO is gearing up for a flood of enquiries for these records.

It is important to recognise that at this stage the changes announced in the Budget are proposals. These proposals will require industry feedback and the passage of legislation before they are implemented. Stay tuned.